Afil Jute Mills (Pvt) Ltd vs. Bangladesh

Afil Jute Mills (Pvt) Ltd vs. Bangladesh

Reference : 58 DLR (2006) 208

Facts & Arguments :

The Petitioner company obtained a loan by way of working capital for taka 29.40 crore to tide over the bad days and the aforesaid loan could not be repaid which was unfortunately accumulated to taka 79,13,42,887.12 inclusive of interest. The petitioner company mortgaged all its assets, movable and immovable properties to the respondent no. 3 bank as security for the loan. The total value of the mortgaged property was taka 103,19,87,000 which exceeds the amount due from the petitioner company. But the respondents served six notices under sec. 9(1)(i) of the Bankruptcy Act, 1997(the Act, 1997) for initiating bankruptcy proceeding against the petitioners. According to the petitioners it is illegal and colourable exercise of power under the law.

Filing affidavit-in-opposition the respondent argued that the value of the said security was far below the actual amount due. But the petitioners did not show any bonafide or take any step to liquidate the amount due. Hence, the respondent bank considered it advisable to issue the impugned notices under sec. 9(1)(i) of the Act, 1997.

The petitioners submitted that sec. 9(1)(i) of the Act,1997 is discriminatory in its scope and is violative of Article 27 of the Bangladesh Constitution as it does not have any guideline as to who among the debtors should be proceeded against under the Act, 1997 and not under the Artha Rin Adalat Ain, 2003 (the Ain, 2003) and indebtedness to the extent of taka 5 lac is too meager to be considered as a guideline for initiating bankruptcy proceeding against a debtor by financial institution or the bank. They also contended that the Act, 1997 and the Ain, 2003 should be construed to be one legislation for the purpose of appreciating that sec. 9(1)(i) of the Act, 1997 is discriminatory. They also argued that sec. 25(2) of the Act,1997 offends against the rule of law as envisaged under the Preamble of the Constitution.

The respondents argued that the Act, 1997 and the Ain, 2003 are two different legislations and cannot be considered as one legislation as they were enacted to accomplish two different objectives. With regard to sec. 25(2) they submit that this section only facilitates the Bankruptcy Court to effectively deal with the debtors and the bankruptcy proceedings to bring it to a meaningful conclusion preventing the debtor to frustrate the proceeding by wanton disposition of its assets and properties.

Judgment :

Sec. 9(1)(i) of the Act, 1997 is claimed to be discriminatory in operation and it lacks proper guidelines. But the court finds no force in this contention, inasmuch as there are sufficient guidelines in this legislation to classify debtors. A group of debtors can be and in fact has been classified in one group for taking action against them under the Act, 1997 leaving the rest out of the group against whom action maybe taken before the Artha Rin Adalat for the recovery of the outstanding loan amount. But as to who among the debtors having a debt to the amount of taka 5 lac or more should be grouped together as a class by applying the said guidelines for initiating bankruptcy proceeding is a matter of discretion left to the administration of the bank or the financial institution or the body of individuals or to individual himself.

The elements of discrimination have been consistently held to be offending the fundamental right i.e. all citizens to be treated as equal before law as contemplated under Article 27 of the Constitution. If the law under challenge is likely to be used or applied to produce different result as regards the persons of the same class or group. The classification to be valid must be founded on some intelligible differentia which distinguish the persons or things grouped together from others left out of the group and the differentia must have a rational relation or nexus to the object sought to be achieved by the statute in question.

In the present case, the debtors, having formed a class after applying the guidelines set out in sec. 9(1)(i), are similarly situated. Hence, there cannot be any discrimination or unequal treatment if bankruptcy proceeding is commenced against them.

Again, the court cannot subscribe the view of construing the Act, 1997 and the Ain, 2003 to be one law, as these two are different legislations and they are enacted by the legislature to attain different objectives. Sec. 9(1)(i) of the Act, 1997 is therefore, held to be a valid legislation.

The court, therefore, does not find any reason to sustain the Rule and the Rule is discharged.

Umme Wahida Akhtar

Umme Wahida Akhtar is a 4th year student of Department of Law, University of Rajshahi. She is a regular contributor for Bangladesh Journal of Legal Studies. She has a sound academic background with Board Scholarships in both SSC and HSC level. She is a proud member of RUMCS. She can be reached at wahidasanna@gmail.com.

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